VZCZCXRO7527
RR RUEHAG RUEHBC RUEHDE RUEHDF RUEHDH RUEHIK RUEHKUK RUEHLZ RUEHROV
RUEHSR
DE RUEHLB #0601/01 1521501
ZNR UUUUU ZZH
R 011501Z JUN 09
FM AMEMBASSY BEIRUT
TO RUEHC/SECSTATE WASHDC 5006
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RHEHAAA/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 02 BEIRUT 000601 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR NEA/ELA AND EEB/IFD/ODF 
STATE PASS USTR FRANCESCKI 
STATE PASS USAID LAUDATO/NANDY/SCOTT 
TREASURY FOR PARODI/BLEIWEISS/AHERN 
USDOC FOR 4520/ITA/MAC/ONE 
NSC FOR SHAPIRO/MCDERMOTT 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EAIR EIND PGOV KFLU LE
SUBJECT: LEBANON: IMF DENIES DISCUSSIONS WITH HIZBALLAH ON NEW 
PROGRAMS (ECONOMIC WEEK IN REVIEW, MAY 25 - 31, 2009) 
 
CONTENTS 
-------- 
 
 
-- IMF DENIES DISCUSSIONS OF NEW PROGRAMS WITH HIZBALLAH 
-- CABINET ENDORSES ECONOMIC PROGRAM TO COUNTER GLOBAL CRISIS 
-- ARAB TELECOM MINISTERS: COOPERATE TO INCREASE INTERNET 
PENETRATION 
 
 
 
IMF DENIES DISCUSSIONS OF 
NEW PROGRAMS WITH HIZBALLAH 
--------------- 
 
¶1. (SBU) An IMF press statement clarified that the IMF 
February-March 2009 mission to Beirut met with major political 
parties, including Hizballah, as part of outreach activities within 
the scope of Article IV consultation discussions but did not make 
any agreement with Hizballah on a loan deal.  Responding to local 
press claims that Hizballah met with the IMF to secure continued 
financial support to Lebanon if the opposition wins the June 7 
parliamentary elections, IMF Beirut office economist Najla Nakleh 
told us the mission met separately with economic experts of the 
pro-government Future Movement, the opposition Free Patriotic 
Movement, and Hizballah.  The purpose of IMF meetings was to explain 
IMF's activity in Lebanon and its Emergency Post-Conflict Assistance 
(EPCA II) program, as well as gather support for Lebanon's economic 
reforms. 
 
¶2. (SBU) Domenico Fanizza, IMF Division Chief for the Middle East 
and Central Asia, said the IMF mission met with Abdel Halim 
Fadlallah -- then Deputy Director of Hizballah's economic research 
center -- and Hizballah Minister of Labor Mohammad Fneish to discuss 
labor and social issues.  According to Fanizza, the mission 
emphasized that although the monitoring of Lebanon's macroeconomic 
performance under Article IV would continue regardless of election 
results, the IMF's Executive Board of Directors would determine the 
possibility of a financial arrangement with Lebanon following the 
expiration of the EPCA II in June 2009. 
 
CABINET ENDORSES ECONOMIC PROGRAM 
TO COUNTER GLOBAL CRISIS 
-------------------- 
 
¶3. (SBU) On May 26, the cabinet endorsed Prime Minister Fouad 
Siniora's 2009-2010 economic program to counter the potential impact 
of the global crisis on the Lebanese economy.  The cabinet also 
tasked a ministerial committee, headed by the PM and including 
ministers of finance, economy and trade, industry, agriculture, and 
energy to prepare the appropriate legislation for implementation. 
The government and central bank implemented some measures already, 
such as salary increases to the public sector.  Other measures 
require cabinet or cabinet plus parliament approval, and so will not 
be acted on for one or two months at least. 
 
¶4. (SBU) The economic plan aims to inject liquidity in the market by 
expediting the settlement of government debts to the private sector, 
financing expropriations necessary to launch infrastructure projects 
financed through soft loans from donor countries, and continuing to 
pay compensation for damage from the 2006 Hizballah-Israel war to 
Lebanese beneficiaries.  The plan also expands the interest rates 
subsidy program to increase lending to the private sector (the 
Central Bank has already issued circulars for that purpose), calls 
to abolish some taxes, and to work with local and international 
institutions to set up equity funds.  The implementation of 
structural reforms endorsed at the Paris III donor conference and 
the creation of three industrial and economic zones throughout 
Lebanon are highlighted. 
 
ARAB TELECOM MINISTERS: COOPERATE 
TO INCREASE INTERNET PENETRATION 
-------------------- 
 
¶5. (U) On May 28-29, Beirut hosted the eleventh Arab International 
Telecom Development Summit, attended by Arab telecom ministers, 
telecom operators, and industry experts from across the MENA region. 
 Participants noted that the penetration rate of high speed internet 
 
BEIRUT 00000601  002 OF 002 
 
 
in the Arab region was only 21%, far below the rate in Europe of 
56%.  Quoting studies that suggest a 10% increase in internet 
penetration contributes to a 1-2% increase in GDP, participants 
proposed greater government to government cooperation to increase 
penetration, given the high cost of projects and geographical 
proximity of the MENA countries. 
 
¶6. (U) Meanwhile, during a meeting of Arab Telecom Ministers on May 
27, Minister of Telecom Gebran Bassil noted that the Ministry was in 
the process of expanding Lebanon's fiber optic network to increase 
high speed internet access.  He hoped to be able to increase 
internet access from 200,000 to 650,000 subscribers in the short 
term, as well as increase penetration of laptops (from four percent 
to 35 percent) and personal computers (from 28 percent to 50 
percent) through the "Computers for Lebanon" project.  Bassil also 
announced that five new international call centers have been opened, 
in addition to the ten already in operation; the call centers, 
located across Lebanon, create job opportunities. 
 
SISON